Aruba, July 9, 2014 - As global watchdogs warn that euphoric financial markets are divorced from economic reality and acting out some reprise of the credit bubble and bust of the past decade, fears of another subprime timebomb are inevitable.

But even if you believe another crisis is brewing, it's most likely not where it was last time. At least not in U.S. securitised mortgages - the heart of systemic blowout that nearly brought down the global banking system in 2008.

A mix of tighter regulation, stricter underwriting standards and the lowest new mortgage applications in almost 20 years means sales of private U.S. mortgage-backed securities have dwindled to just $600 million (350 million pounds) so far this year - a mere sliver of the record $726 billion of new bonds in 2005.

For what it's worth, new U.S. bonds backed by subprime mortgages chave all but vanished. Bonds backed by subprime U.S. auto-loans have taken up some of the running, but not on anything like the same scale.

Yet in its latest annual report the Bank for International Settlements, the Basel-based forum for the world's major central banks, seemed pretty convinced global debt markets are once again in risky territory and heading for a fall.

The BIS focused mainly on fresh accumulation of new corporate and sovereign debt by asset managers rather than banks and scratched its head about the coincidence of sub-par economic activity and record low default rates that in turn depress borrowing rates and credit spreads ever lower nearly everywhere.

'Exuberant' equity and real estate and rock-bottom financial volatility merely fed off that picture, it said. And it added that if all this was simply due to zero official rates, it could all suddenly go into reverse when they rise.

"It is hard to avoid the sense of a puzzling disconnect between the markets' buoyancy and underlying economic developments globally," the report mused.

Low-grade corporate rather than household borrowing was marked out for special attention.

New sales of 'junk' bonds worldwide hit a quarterly record of $148 billion between April and June, according to ThomsonReuters data. That's up from average quarterly sales of around $30 billion before the last credit bubble burst.